FINANCING MECHANISMS FOR
POST-CONFLICT RECONSTRUCTION
Nicole Ball
Center for International Policy, Washington DC
For the Conflict Research Unit of the Clingendael Institute
Netherlands Institute of International Relations
‘Clingendael’
Conflict Research Unit
October 2007
Desktop publishing: Fadime Koç
Netherlands Institute of
International Relations
‘Clingendael’
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© Clingendael Institute
i
CONTENTS
CONTENTS
I
INTRODUCTION
1
I.
FINANCING MECHANISMS: STRENGTHS AND WEAKNESSES
2
II.
CREATING CONDITIONS FOR SUCCESS
15
ANNEX 1. PRINCIPLES FOR GOOD INTERNATIONAL ENGAGEMENT IN FRA GILE STATES
AND SITUATIONS
21
Preamble
21
The Basics
21
The Role of the State & Peacebuilding
21
The Practicalities
22
ANNEX 2. MDF’S HOUSING PROGRAMME
23
ANNEX 3. DOCUMENTATION CONSULTED
25
© Clingendael Institute
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INTRODUCTION
1.
The Minister for Development Cooperation of the Netherlands, Minister Koenders, has requested
a strategy paper presenting an overview of different mechanisms available for the financing of postconflict reconstruction, and assessing the pros and cons of these different mechanisms as well as their
(possible) complementarities. This report is based on a desk study (document review plus telephone
and email interviews) that was conducted over a short time period and should be seen as the first
step in a process of determining which financing mechanism the Netherlands should employ in postconflict recovery efforts.
2.
The report begins by examining the strengths and weaknesses of the most frequently used
mechanisms. It examines the appropriateness of different financing mechanisms in the context of
good donor practice in engaging with fragile states. It concludes by offering some suggestions on
how bilateral donors can create conditions for successful in financing post-conflict reconstruction.
© Clingendael Institute
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I. FINANCING MECHANISMS: STRENGTHS AND
WEAKNESSES
3.
It is widely understood that the path from violent conflict to sustained recovery is neither easy
nor straight. There are numerous needs that have to be addressed in the course of recovery but the
prioritization of needs and the sequencing of activities to address them varies from country to country
and, at time, even from region to region within the same country. In order to most effectively and
efficiently meet these different needs, bilateral donors such as the Netherlands make use of a variety
of funding mechanisms. These mechanisms can be classified under four headings:
•
Direct execution, by own staff or, increasingly, through contractors (including NGOs);
•
Pooled funding mechanisms, including the UN’s Common Humanitarian Funds, MultiDonor Trust Funds (MDTFs), and agency-specific trust funds;
•
Co-financing;
•
Channel funding (UN agencies and International NGOs, or INGOs).
Table 1 summarizes the strengths and weaknesses of the major mechanisms used in each of these
categories. The categories are listed in descending order of the control they allow donors to exercise
over the use of the resources they provide.
4.
It is difficult to offer hard-and-fast conclusions about the appropriateness of specific financing
mechanisms or how best to combine the various financing mechanisms available to bilateral donors
because individual country circumstances vary considerably. Nonetheless, lessons have been learned
over the years about the best way to engage with fragile states (of which conflict-affected countries
are one sub-set). These lessons, as expressed in the Principles for Good International Engagement in
Fragile States & Situations (summarized in Annex 1), offer a useful starting point for determining
which financing mechanisms can best promote post-conflict recovery.
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Table 1. Major Financing Mechanisms for Post-Conflict Recovery
Strengths
Weaknesses
Comments
Direct donor
execution
Maximum control over programming Heavy requirements for donor staff
to ensure appropriate design
inputs, particularly in country in
features and maximize outcomes. terms of monitoring design and
implementation and running
political interference
Pooled
financing
UNDG MDTFs,
administered
through UNDP
Multi-Donor
Trust Fund
Office
World Bank
MDTF
Netherlands ceased direct execution
in 1980s due to concerns about lack
of local ownership. With
redistribution of MFA staff may be
possible to implement nationally
owned, directly executed activities.
Ability to put functioning MDTF in Inadequate support for building
Some means of facilitating
place rapidly. Ability to operate
local capacity. Has been slow to
engagement of NGOs (international
when no effective government in
turn over management of activities and local) in Trust Fund activities is
place and in early post-conflict
to governments. Management
essential. UNDP has created an
situations. Ability to rapidly transfer structures often not sufficient
MDTF office to support UNDG trust
resources to UN agencies, which
inclusive of non-UN agencies,
funds. UNDG/UNDP have little
maximizes effectiveness in meeting leading to conflicts of interest.
incentive to try to force a switch to a
early recovery, needs. Ability to
Earmarking allowed for sectors,
largely non-earmarked system, as
support transfer of recurrent
clusters, agencies and outcomes. this would decrease income.
expenditures for interim
No earmarking for projects.
Earmarking especially important for
governments. Can easily transfer Projects must be approved by MDTFsmall UN agencies. However,
money to World Bank as passSteering Committee and/or national UNDP’s MDTF Office believes that
through agent in context of joint
authorities. Potential for conflict of negative effects of earmarking can
programme.
interest and by-passing national
be at least partially overcome by
priorities.
linking donor funding to a wellprioritized national recovery
strategy. UNDP has established
procedures intended to create
firewall between UNDP's roll as
Administrative Agent on behalf of UN
agencies and UNDP’s role as
Participating UN Organization.
Ability to support development of Medium-term instrument. Needs to New policies for post-conflict and
an effective state over medium- and be complemented by quick
emergency situations need to be
long-term. Have helped countries disbursing money. Until recently implemented. There are positive
make transition from donorBank procedures not adequately
signs but too early to tell how this
managed assistance to increasingly adjusted to fragile states. With new will work. Framework agreement
greater government role in
policies and procedures aimed at with UN on ability of UN agencies to
managing aid policies and decisions streamlining the Bank's engagementuse own financial management,
and integration of aid into the state in conflict affected countries (OP/BP audit, procurement procedures is
budget. Bank administered trust 8.0), including fiduciary oversight, essential, as is some means of
funds tend to perform better when and providing more in country
facilitating engagement of NGOs
assistance is delivered as budget
supervision by Bank staff, earlier
(international and local) in MDTF
support than projects. Aceh post- and more rapid Bank engagement management structure and
tsunami MDTF demonstrates that it in peace processes is possible.
activities. Responsibility for Bank
is possible for WB administered
Bank has not had framework
trust fund activities are spread
MDTFs in emergency situations to agreements with UN agencies
throughout the organization, making
channel resources to local level,
allowing rapid transfer to resources it difficult to access institutional
reducing opportunities for
to UN agencies, slowing Bank MDTF memory, transmit good practices
corruption. MDTF administration
disbursements. Bank and UN
and so on. Need for single office to
Seen as a way of engaging the
working on agreement. Bank does centralize MDTF operations.
Bank earlier in post-conflict period, not allow earmarking but does allow
both by some donors and some
preferences to be stated, which can
recipient governments. For Bank limit national ownership although
offers entry points to countries it
the Bank attempts to link
has not engaged with for some
preferences to nationally
time.
determined priorities.
© Clingendael Institute
UN Common
Humanitarian
Funds (CHFs)
United Nations
Peacebuilding
Fund (PBF)
4
Strengths
Intended to promote coherence of
donor approach, by linking projects
approved to an agreed Work Plan
and enabling Humanitarian
Coordinator (HC) to fund gaps.
UNDP highly effective at passthrough to UN agencies. UNDP
MDTF Office has begun to preapprove large NGOs and other
agencies (such as IOM) to speed
contracting with non-UN
implementers. Could support early
recovery activities.
Weaknesses
Comments
Does not control adequate amount Two pilots under way since 2005.
of resources to affect coherence of Review undertaken during 2006.
donor approach, although in DRC M&E procedures in the process of
has attracted more funding that
being worked out at time of first
initially anticipated. Work Plans not review. Second review currently
adequately prioritized. Operating (October 2007) underway will be
procedures of CHFs promote
able to evaluate changes made
conflict of interest since same
following 2006 review. These
agencies are developing proposals include opening decision-making to
and vetting proposals. UNDP
non-UN actors and new partnership
procedures re NGOs initially not
agreement for NGOs based on
adequately adjusted to fragile
humanitarian procedures. Important
states although these reportedly
that donors not contributing to CHFs
revised following 2006 review of
consult with HC before making
CHF pilots.
allocation decisions. HC also needs
political support of bilateral donors.
DRC 2006 Action Plan based on 2month, countrywide participatory
needs assessment; discovered
urgent needs previously overlooked.
However, because time-consuming
and labour-intensive, not repeated;
instead Action Plan assumed same
needs for 2007.
In principle, PBF is intended to
Inter-governmental body,
PBF was launched on 11 October
leverage additional donor financing comprised of diplomats not
2006 and first grants to countries
for peacebuilding and to provide
humanitarian, post-conflict recovery before the Peacebuilding
quick money (Emergency Grants) or development specialists.
Commission (Sierra Leone and
for activities that will support the Provides 1-year grants, with
Burundi) only began to be made in
peace process, thereby creating an possibility of extension.
early 2007. First "Emergency Grant"
environment conducive to recovery. Requirement for integrated
to support the peace process in
peacebuilding strategy may require Burkina Faso approved August 2007.
unnecessary work in some
PBF still very much "work in
countries, duplicate existing
progress."
strategies, and be donor-driven
rather than nationally owned.
Funding must be channelled
through a UN agency, increasing
overhead costs.
Co-financing
IDA post-conflict While most IDA grants rely on
grants/nonperformance based allocations
accrual
(PBA), post-conflict countries can
benefit from exceptional financing
arrangements, as well as prearrears clearance grants; eligibility
for exceptional financing is 7 years,
including a 3 year phase-out period
to PBA criteria (soon to be doubled
to 6 to avoid program disruptions,
so total 10 years).
Inadequate transparency on
application of post-conflict
performance indicators, which
determine eligibility for financing.
Relatively small number of countries
eligible for this financing.
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Co-financing
Strengths
Weaknesses
Comments
World Bank
Post-Conflict
Fund
Grants focused on the restoration Resources available limited,
Resources primarily from World
of the lives and livelihoods of war- constraining number of activities Bank Development Grant Facility,
affected populations. Efforts
that can be undertaken. Demand with some donor co-financing,
made to leverage resources
for financing exceeds supply.
including both earmarked and
through a variety of fundin g
unearmarked co-financing.
arrangements.
Netherlands provided US $ 2
Application/approval procedures
million co-financing in 2001 to a
less onerous than standard Bank
project in Kosovo. LICUS and PCF
procedures, enabling rapid
managed by one Secretariat,
approvals and a variety of
maximizing opportunities for
partners. Grant recipients include
coherence, complementarity and
national governments,
learning.
institutions, NGOs, United Nations
agencies, transitional authorities
and other civil society institutions.
Can engage in early recovery
activities.
World Bank
LICUS Trust
Fund
Established to strengthen
Size of allocations limited,
Resources primarily from World
institutions, support early efforts constraining activities that can be Bank reserve, with some coat policy reform and build
undertaken.
financing from donors, including
capacity for social service delivery
both earmarked and unearmarked
in fragile states. Special IDA
co-financing. LICUS and PCF
allocations for non-accrual
managed by one Secretariat,
countries, enabling early Bank
maximizing opportunities for
engagement. Uses Post-Conflict
coherence, complementarity and
Fund procedures. Potential to
learning
engage early in peace process.
UNDP/BCPR
Thematic Trust
Fund for Cris is
Prevention and
Recovery
Primary mechanism for allocating
donor non-core contributions to
UNDP’s crisis work. Aligned with
UNDP’s Strategic Plan, BCPR’s
outcome areas as described in its
five-year Strategy and with
country requests. Can disburse
very rapidly and engage early in
peace process.
Only for UNDP execution. Allows
earmarking for BCPR's key
thematic areas and specific
countries. When funding
earmarked to specific country,
donor develops a project or
programme in consultation with
BCPR or UNDP Country Office.
Earmarking can limit national
ownership.
As of 2007, Fund restructured to
accept unearmarked
contributions, earmarked
contributions
benefiting individual programme
countries, and earmarked
contributions for the outcome
areas of conflict, disaster, early
recovery and gender equality.
Rapid delivery and familiarity with
conditions when previously
present in country. Those with in
country presence can engage
early in peace process.
By supporting own programme,
can undercut funding of
government priorities/national
ownership. Can be slow to
transfer responsibilities back to
government. Frequent
competition among members of
UN family for resources.
One UN approach could produce
greater coherence within UN
family, although not clear how
this will apply to post-conflict
states.
Promotes more strategic and coordinated approach to financing
humanitarian needs. Enhances
ability of UN agencies to raise
funding and to better gain access
to and protect vulnerable
populations.
Can undercut funding of
Primarily experienced at delivering
government priorities. CAP
humanitarian assistance, although
frequently not adequately
inclusion of early recovery
prioritized. Insufficient sharing of activities recognized in Good
data among agencies.
Humanitarian Donorship
Monitoring needs to be improved. principles.
Frequent competition among
members of UN family for
resources.
Channel
funding
United Nations
agencies
United Nations
Consolidated
Appeals Process
(CAP)
© Clingendael Institute
Channel
funding
International
NGOs
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Strengths
Weaknesses
Rapid delivery and familiarity with
conditions when previously
present in country. Those with in
country presence can engage
early in peace process.
Local NGOs/civil Local knowledge; potential for
society
rapid implementation.
5.
Comments
By supporting own programme,
can undercut funding of
government priorities/national
ownership. Can be slow to
transfer responsibilities back to
government.
May be captured by governments
or unacceptable to governments;
low capacity
In general, pooled funding mechanisms, particularly MDTFs, appear to be best suited to
operating in post-conflict environments in a manner consistent with the fragile states principles. Used
correctly pooled funding mechanisms can promote:
•
National ownership of post-conflict recovery efforts;
•
Mobilization of resources around a prioritized national recovery plan;
•
Accountable use of resources delivered on budget;
•
Broad
national
participation
in
recovery
efforts
through
the
inclusion
of
non-
governmental/civil society actors;
•
Predictability and flexibility of financing; and
•
Donor coordination and reduced transaction costs for governments.
Pooled funding mechanisms also have benefits for donors such as enabling them to engage in
countries with minimal presence and minimizing their fiduciary risk. 1
6.
In consequence, pooled funding mechanisms have become increasingly common in post-conflict
environments. As experience with them has grown, it has become clear that the benefits that can be
derived from pooling resources do not occur automatically.
Problems in execution have arisen
primarily because of: a) regulations and operational procedures of the two main pooled financing
administrators, the World Bank and UNDP, b) unrealistic expectations on the part of donors,
governments and Fund administrators about what pooled funding can, and cannot, deliver in specific
timeframes, c) the exigencies of post-conflict environments, d) the failure of donors to provide
adequate oversight and political support to pooled financing mechanisms; and e) the preference of
1
See for example Scanteam/Norway, Review of Post-Crisis Multi-Donor Trust Funds, Final Report, February 2007; Development
Initiatives, Review of Trust Fund Mechanisms for Transition Financing, Phase 2 Report, 29 May 2006; Center on International
Cooperation/New York University in collaboration with The Humanitarian Policy Group/Overseas Development Institute,
Common Funds for Humanitarian Action in Sudan and the Democratic Republic of Congo, Monitoring and Evaluation Study,
December 2006.
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donors for allocating resources bilaterally outside trust funds and/or earmarking contributions to trust
funds, encouraged by active solicitation of resources by UN agencies and international NGOs. 2
7.
In principle, optimal outcomes will be achieved by allocating resources through a single fund with
a single administrator. In an ideal world, this would be a national fund, which would significantly
maximize the opportunities for achieving the benefits summarized in paragraph 5. In practice, donors
are often unwilling to give national governments in post-conflict environments significant responsibility
for managing resources until their financial management systems have been strengthened and it is
clear that they are able to manage such funds in an effective and accountable manner.
8.
Additionally, it is difficult to create one internationally administered fund that has sufficient
flexibility to address the range of conditions and needs existing in post-conflict environments. In part
this is because the two main administrators of pooled funding mechanisms (the World Bank and the
UN) have different, although largely complementary, capacities and are still working out the best ways
of working together.
9.
The World Bank has tended to be the preferred administrator of multi-donor trust funds to a
large extent because of its ability to help governments address broad policy and economic
development issues. 3
The Bank has been slow, however, in adjusting its normal procedures and
regulations to post-conflict environments. This has hampered its ability to, for example, put MDTFs in
place quickly enough to finance rapid improvements in service delivery or job creation in the
immediate post-conflict period. Over the last year or two, the Bank has undertaken a number of
policy and operational reforms to overcome the constraints on its capacity to operate effectively in
post-conflict environments and to clarify and strengthen its working relations with the United Nations
system (Box 1). That these changes have recently been accorded high priority is due in no small part
to pressure from donors such as the Netherlands.
10. UN agencies have proven capacity to implement activities, including establishing trust funds,
quite rapidly, and UNDP has established the Multi-Donor Trust Fund Office to facilitate the
establishment and operation of MDTFs. At the same time the UN family has had difficulties in helping
governments develop the capacity to lead recovery processes and lay the foundation for capable
states. And although the UN system is reportedly moving away from direct execution toward national
execution of UN-funded activities, funding from the Peacebuilding Fund and Common Humanitarian
Funds are required to pass through UN agencies before being allocated to executing agencies,
increasing the overheads on these resources. Additionally, despite ongoing efforts to implement the
2
World Bank MDTFs do not allow earmarking, but donors are allowed to express preferences, although efforts are generally
made to limit the impact of preferences. See also the discussion in paragraph 24.
3
Scanteam/Norway, Review of Post-Crisis Multi-Donor Trust Funds, Final Report, February 2007, p. 107.
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Box 1. Strengthening World Bank Capacity to Support Post -Conflict Recovery
While the World Bank has been the donors’ preferred administrator of multi-donor trust funds, Bank
regulations and procedures have at times negatively affected the pace and scope of the work undertaken. In
particular, the lack of institutional agreements governing the terms under which funds from Bank
administered trust funds will be used and accounted for by UN agencies and non-governmental bodies has
undermined the ability of Bank-administered trust funds to disburse rapidly. Additionally the pace of Bank
work has suffered because the Bank works primarily through governmental channels but normal Bank
procedures are too complex for fragile, post-conflict states. The in-country presence of experienced Bank
staff has also been inadequate, particularly in the early stages of international engagement in post-conflict
activities. The Bank has also been reluctant to engage with issues relating to the security sector.
The Bank has undertaken a number of reforms aimed at streamlining procedures and increasing the number
of experienced staff in country. It is increasingly able to include the security and justice sector in work
relating to its core competencies, especially public finance management, and to support integrated recovery
programmes in areas outside its core competencies in partnership with other donors when requested by
member governments. The Bank is also seeking to reach a formal agreement with UN agencies on the
regulations governing financial management, procurement, audit, anti-corruption measures of money
transferred from Bank administered trust funds to UN agencies. It is hoped that this agreement will be in
place by the end of 2007 or early 2008. In addition, the Bank and the UN are developing a partnership note
for crises and emergencies that may include:
Guiding principles for work in crises in emergency situations, such as a focus on strengthening the
resilience of national institutions:
•
Commitment to a common platform for conflict and post-disaster needs assessments and recover
planning, leading to, among other things, country-specific division of labour;
•
The fiduciary framework mentioned above, which will govern financing of UN funds and programs
under specific emergency situations and provide guiding principles for collaboration in multi-donor
trust funds; and
•
A field-driven communications protocol to facilitate coordination of joint approaches in post -crisis
environments.
Source: World Bank Operational Manual, Operational Polices, OP 8.00, “Rapid Response to Crises and
Emergencies,” March 2007; World Bank Operational Manual, Bank Procedures, BP 8.00, “Rapid Responses to
Crises and Emergencies,” March 2007; and World Bank, Operations Policy and Country Services, “Toward a
New Framework for Rapid Bank Response to Crises and Emergencies,” January 12, 2007 (revised March
2007), International Development Association, Operational Approaches and Financing in Fragile States,
Washington, DC: Operational Policy and Country Services and Resource Mobilization Department, June 2007,
p. 14.
recommendations of the UN High Level Panel on System-Wide Coherence, UN agencies remain
intensely competitive.
11. The preference of bilateral donors to allocate the bulk of their funding outside pooled
mechanisms has also prevented the creation of a single fund.
Donors continue to use multiple
channels for a variety of reasons, ranging from concerns about corruption in recipient countries to the
ability to demonstrate that activities popular with their own publics or mandated by their legislatures
are being funded. The result, as one recent review of MDTFs observed, is that these practices impose
“considerable administrative costs on the recipient.”4 They also increase the risk that donor financing
will not support national priorities, will undermine already extremely weak government capacity, and
4
Scanteam/Norway, Review of Post-Crisis Multi-Donor Trust Funds, Final Report, February 2007, p. 123.
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lead to investments that are redundant and unsustainable.
Some of these problems could be
overcome if donors were to allocate resources against a single, prioritized, costed national
programme.
Donors have, however, frequently chosen to by-pass both governments and national
recovery plans by funding UN agencies and INGOs with their own programmes and priorities and by
earmarking trust fund contributions for non-priority activities.
12. These problems have been evident both in regard to financing overall recovery efforts and to
financing discrete portions of recovery, such as disarmament, demobilization and reintegration (DDR).
For example, a review of DDR financing conducted in 2005 found that donors were using a multiplicity
of often not well-coordinated financing mechanisms to deliver money (Box 2) and concluded:
‘The international community should place a high priority on agreeing methods of
centralizing DDR financing through multilateral funding mechanisms linked to a national
plan, ideally implemented through national institutions. Such a financing system is likely to
draw on three types of financial resources: 1) flexible, early money; 2) up-front money
(assessed contributions and pre-committed multi-donor trust funds); and 3) voluntary
money/co-financing. The success of such an integrated funding system relies heavily on the
close collaboration among different focal points, bearing in mind that these focal points may
be different in different DDR processes. 5’
13. Experience to date suggests that in order to determine how best to combine financing
mechanisms to maximize the achievement of optimal outcomes, it is important to ensure that:
•
Financing mechanisms are appropriate to country context/priority needs and a realistic
assessment has been made of what financing mechanisms can and cannot achieve under
prevailing conditions in a given timeframe;
•
Financing mechanisms help to strengthen national ownership of recovery processes, in
particular by fostering the capacity of national actors to engage effectively and
accountably in recovery processes, including routing donor resources through the national
budget wherever possible.
14. Financing mechanisms are appropriate to country context/priority needs, and a
realistic assessment has been made of what financing mechanisms can and cannot
achieve under prevailing conditions in a given timeframe . Afghanistan and Southern Sudan
offer two contrasting experiences in using MDTFs to meet both short- and medium-term needs. The
World Bank-managed Afghanistan Reconstruction Trust Fund (ARTF), which was intended to support
5
Nicole Ball and Dylan Hendrickson, Review of International Financing Arrangements for Disarmament, Demobilization and
Reintegration, Phase 2 Report to Working Group 2 of the Stockholm Initiative on Disarmament, Demobilization and
Reintegration, September 26, 2005, paragraph 171, p. 57.
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medium-term capacity building and investment, was preceded by a short-term UNDP-managed trust
fund, the Afghan Interim Authority Fund (AIAF), that came on line rapidly and was able to finance
salaries at a time when the interim government was being put in place and had no resources of its
own. Donors facilitated this outcome by providing unearmarked funds. The ARTF was established by
the time the AIAF was due to close down.
Box 2. Types of Financial Resources Available to DDR Programmes
§
Flexible, early money:
Multilateral quick-disbursing funds (such as UNDP Trac 1.1.3, UNDP Conflict Prevention Thematic
Trust Fund, World Bank Post -Conflict Fund)
o Bilateral quick-disbursing funds
o National government funds
o
§
o
o
§
Up-front money
UN mission budget
MDRP-type trust fund based on pre-commitments
Voluntary money
o
o
o
o
o
o
o
Bilateral contributions to MDTFs
Bilateral contributions to UN agencies
Contributions from UN agency/international NGO core funds
Projects funded directly by bilateral funds and executed by donor agencies, international and local
NGOs, community-based organisations, consulting firms
National government contributions
World Bank contributions, including Project Preparation Funds
In-kind contributions from all sources
15. In Southern Sudan, although a short term MDTF managed by UNICEF was established, donors
did not channel significant amounts of money through it because of its short mandate and perhaps
also because the World Bank claimed that it could bring an MDTF online rapidly. Additionally, the
UNICEF MDTF was not part of a clear, high priority transition plan, unlike the AIAF, reflecting the
different geopolitical niches occupied by Afghanistan and Sudan. However, the World Bank-managed
MDTF in Southern Sudan has experienced difficulties in delivering early money due primarily to the
extreme weakness of Southern Sudanese counterparts, the Bank’s own operational procedures
(including the need to negotiate agreements with individual UN agencies), and the initial lack of
experienced Bank staff based in Juba.
16. Box 3 summarizes several options that can be considered for sequencing financing in these
environments so that early recovery needs can be met.
17. A critical environmental factor affecting the success of any aspect of post-conflict recovery,
including decisions on financing mechanisms, is whether in fact the conflict has ended. One recent
© Clingendael Institute
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Box 3. Meeting Early Recovery Needs
One option would be to combine UN and World Bank administered MDTFs with clearly delineated responsibilities
to avoid overlap and competition between the funds. As one recent evaluation of MDTFs concluded: “a) World
Bank and UN MDTFs are both necessary in most transition situations b) they cannot be treated as successive
stages but need to operate concurrently albeit with the UN MDTFs starting earlier and the World Bank MDTFs
continuing until governments are in a position to accept General Budget Support (GBS) c) they need to work
within a structure which maximises synergies and complementarities and encourages donors to see them as two
arms of transition financing, rather than competing options.” (Development Initiatives, Review of Trust Fund
Mechanisms for Transition Financing, Phase 2 Report , 29 May 2006, p. 6.)
An alternative approach, once the new World Bank procedures and the UN-World Bank framework agreement are
in place (Box 1), would be for a World Bank administered MDTF to channel resources to UN agencies (as Partner
Agencies) and other entities capable of responding rapidly in the initial phases of a recovery process. The Bank
MDTF could progressively build up the government’s capacity to lead the recovery process and reach agreement
on a realistically prioritized national recovery strategy.
The very earliest recovery assistance could also be channelled through a Common Humanitarian Fund where one
is already operational and donors are willing to allocate a significant amount of resources for early recovery
through the CHF in order to discipline executing agencies and align with national priorities. It is important to
recall that, like Post -Conflict Needs Assessments, CHF Work Plans/Action Plans have not been sufficiently
prioritized and have tended to be supply- rather than demand-driven. (Stoddard, Abby, Dirk Solomons,
Katherine Haver and Adele Harmer, Common Funds for Humanitarian Action in Sudan and the Democratic
Republic of Congo, Monitoring and Evaluation Study, New York: Center on International Cooperation/New York
University in collaboration with The Humanitarian Policy Group/Overseas Development Institute, December 2006,
http://www.cic.nyu.edu/.)
If funding were channelled directly through UN agencies or INGOs, it would be important to ensure that these
resources were used for priorities identified by national actors.
All of these options need active donor participation and direction if the desired outcomes are to be achieved.
review of MDTFs concluded, “the single most important factor in determining the success of an MDTF
is the security situation.”
This makes conflict assessments at the strategic and project levels an
essential component of establishing and operating an MDTF, but such assessments are often not
undertaken. 6 For example, the International Reconstruction Fund Facility for Iraq (IRFFI), which has
both a UN and a World Bank window, is operating under conditions of conflict, not in a post-conflict
environment.
This has had a significant impact on the way in which the IRFFI operates and the
effectiveness and impact of the activities it finances. When the IRFFI was established, however, it
was assumed that “the security situation would normalize.” 7
18. While the security environment is particularly difficult in Iraq, many MDTFs in so-called “postconflict countries” are in fact operating under conditions of semi-conflict. The possibility of working in
semi-conflict conditions requires that MDTFs are sufficiently flexible to be able to channel resources
through agencies experienced in working in such environments – such as some UN agencies or INGOs
– or that donors contract directly with these bodies.
It should not, however, prevent efforts to
develop a nationally owned recovery plan against which donor resources can be allocated.
6
Scanteam/Norway, Review of Post-Crisis Multi-Donor Trust Funds, Final Report, February 2007, p. 87. As this review notes, it
is difficult to assess the effectiveness and impact of activities financed by IFRRI given the security conditions in the country.
7
Scanteam/Norway, Review of Post-Crisis Multi-Donor Trust Funds, Volume II: Country Annexes, February 2007, Annex D:
The Iraq Trust Funds, para. 19.
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19. Financing mechanisms help to strengthen national ownership of recovery processes,
in particular by fostering the capacity of national actors to engage effectively and
accountably in recovery processes, including routing donor resources through the
national budget wherever possible.
National actors and institutions should assume the
leadership of and political responsibility for post-conflict recovery. This means that national actors –
including national governments and members of civil society – assume the responsibility for decisions
about objectives, policies, strategies, program design, and implementation modalities.
National
ownership does not require management of resources but will be enhanced to the extent that
resources are on budget. It also does not necessarily imply local capacity to implement activities,
although national actors should be involved in deciding who will implement activities.
20. Experience indicates that although working with national actors and through national institutions
(including those at community level) is initially slower than direct execution by international executing
agencies, it yields greater benefits over time, produces more sustainable outcomes and has a better
response from beneficiaries. In principle, all of the financing mechanisms in Table 1 should be able to
support the development of national capacity to lead and engage in recovery activities. In practice,
however, any financing that is not linked to a prioritized, costed national recovery programme and
does not explicitly have as an objective the development of national capacity (governmental and nongovernmental, national and local levels) will not maximize its capacity to strengthen national
ownership. World Bank administered MDTFs are more likely to achieve these objectives than funding
disbursed among a variety of UN agencies, NGOs and consulting firms or even a UN administered
MDTF.
21. At the same time, any MDTF needs explicitly to incorporate design and operational features that
promote national ownership.
MDTFs should, for example, include representatives of national
governments and civil society on management bodies, ensure that the national government receives
any necessary assistance to develop a national recovery strategy in a participatory manner, and have
sufficient flexibility to allocate resources to communities, community groups and other nongovernmental actors, as well as to central government ministries. Neither the World Bank nor UNDP’s
procedures are particularly well adapted to working with non-governmental actors, local or
international. Both organizations work extensively through governments. 8 This has limited the ability
of non-governmental actors to participate as fully in post-conflict recovery as desirable. 9
It is
8
Scanteam/Norway, Review of Post-Crisis Multi-Donor Trust Funds, Final Report, February 2007, p. 35. Some UN agencies are
able to work more closely with non-governmental actors than others, particularly in terms of project execution.
9
In Sudan, non-governmental organisations experienced significant difficulties in accessing funds from the UNDP-managed
Common Humanitarian Fund (CHF). While CHFs are primarily intended to deliver humanitarian assistance, the Principles and
Good Practice of Humanitarian Donorship includes early recovery. See Center on International Cooperation/New York
University, “Evaluation of the Common Funds in the Sudan,” 7 November 2006, p. 4. According to this source, the experience
of NGOs in Sudan was “an unmitigated disaster” (pp. 23-25). Similar problems have arisen in the DRC. The problems with
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Box 4. Afghanistan Reconstruction Trust Fund Monitoring Agent
Although the World Bank was able to establish the ARTF quickly, it ran into problems during the first year of
operation, some of which included the Monitoring Agent. According to a recent evaluation of MDTFs,
‘…the Monitoring Agent was accused of not understanding its role well to begin with and the Bank
did not have sufficient own capacity to clarify roles immediately, and the dialogue with some of the
national authorities was not good enough for ensuring smooth functioning and disbursement of
funds…’
‘The Bank ended up establishing two teams that supported the implementation of the ARTF. The
first was a management unit consisting of one international staff member with experience from
financial management and supported by two local staff. The other was a more general financial
disbursement unit including quite senior staff from Washington (some on a more permanent basis,
others coming in on missions but quite frequently) that supported the Bank portfolio overall, but
also the ARTF. This latter team worked particularly closely with Ministry of Finance staff to ensure
that procurement and expenditure management routines were being followed, documentation of
acceptable quality produced, etc. Once these two teams began functioning properly, the
disbursement rates improved, as did overall financial control and reporting.’
Source: Scanteam/Norway, Review of Post -Crisis Multi-Donor Trust Funds, Volume II: Country Annexes,
February 2007, Annex H: The Afghanistan Trust Funds, especially paras. 33-34.
important that donors promote the inclusion of features that support participatory, nationally owned
recovery in MDTFs. UNDP’s MDTF Office has recently developed new procedures for the Common
Humanitarian Fund, which can be used for early recovery, that are based on humanitarian procedures.
22. Donors have understandable concerns about the potential that exists for diversion of resources if
financing is channelled through government budgets. There is, however, growing experience through
World Bank managed MDTFs that the use of a monitoring agent can both reduce opportunities for
diversion in the short term and help develop capacity for sound financial management in the medium
term. 10 It is important, of course, that the monitoring agent is properly tasked and is equipped to
carry out the task. While this function can be, and often is, contracted out to a consulting firm, the
World Bank is learning that it may need to provide some of this support itself (Box 4).
23. Another means of combating corruption is to push resources to the lowest level possible. The
Multi-Donor Fund for Aceh and Nias (MDF) has supported a housing programme that combines
financing through the central government with local execution. 11
The Kecamatan Development
Project, executed by the Ministry of Home Affairs, provides funding directly to communities. ThreeNGOs derived in large part from UNDP’s decision to use its normal Project Cooperation Agreement in emergency situations. See
also Center on International Cooperation/New York University, “Evaluation of the Pooled Fund in the Democratic Republic of the
Congo,” 7 November 2006, pp. 2, 18-20 and Stoddard, Abby, Dirk Solomons, Katherine Haver and Adele Harmer, Common
Funds for Humanitarian Action in Sudan and the Democratic Republic of Congo, Monitoring and Evaluation Study, New York:
Center on International Cooperation/New York University in collaboration with The Humanitarian Policy Group/Overseas
Development Institute, December 2006, http://www.cic.nyu.edu/.
10
For example, see Gebreselassie Tesfamichael, Nicole Ball and Julie Nenon, “Peace in Sierra Leone: Evaluating the
Disarmament, Demobilization, and Reintegration Process. The Final Evaluation of Disarmament, Demobilization and
Reintegration Program and the Multi-Donor Trust Fund Supporting DDR,” Washington, DC: Creative Associates, October 2004.
11
While the MDF addresses recovery from natural disaster, the December 2004 earthquakes and tsunami, Aceh is also a
conflict-affected region, making inclusiveness particularly important.
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quarters of the project resources are transferred directly to sub-districts as block grants. According to
the World Bank, the KDP “has a solid multi-layered control mechanism to prevent corruption
throughout planning and implementation of village projects.”
Watchdog NGOs have rated this
programme highly in its ability to involve local actors and meet local needs (Annex 2).
24. Unfortunately, many donors finance outside MDTFs or encourage the establishment of MDTFs
that allow earmarking. A recent evaluation of MDTFs estimated that 90 percent of the UN’s IFRRI
window for Iraq is earmarked, while donors expressed sector preferences on approximately two-thirds
of the funds they provided to the World Bank window. 12 Earmarking can reduce the ability of MDTFs
to target national priorities, although the UNDP MDTF Office does not allow earmarking at the project
level. Preferencing (a form of “soft earmarking”) can have a similar outcome, although the World
Bank attempts to limit the negative consequences by specifying the scope of preferences. In the
World Bank administered Afghanistan Reconstruction Trust Fund, for example, donors are not allowed
to express preferences for more than 50 percent of their annual contribution. In addition, their
preferences must be for a government priority, be included in the development budget, and have a
financing gap.
Checklist: Maximizing Outputs from Multiple Post -Conflict Financing Mechanisms
12
√
Conduct an assessment of country context (political, economic, social, security factors) prior to deciding
which financing mechanism(s) to employ in order to assess Dutch priorities.
√
Consider which financing mechanisms are best suited to promoting the desired outcomes in a given
environment in a realistic timeframe.
√
Determine which financing mechanisms are most likely to promote national ownership (government
capacity to set policy and make decisions about funding priorities, participation of non-governmental
actors).
√
Determine which financing mechanisms are best suited to strengthening the capacity of national
stakeholders to develop national policies/plans to guide funding and to manage financial resources
accountably.
√
Assess which funding mechanisms maximize the ability to channel external resources through the state
budget with appropriate levels of oversight.
√
Determine which financing mechanisms will minimize transaction costs (financial and human/institutional
capacity) to the host government.
Scanteam/Norway, Review of Post-Crisis Multi-Donor Trust Funds, Volume II: Country Annexes, February 2007, Annex D:
The Iraq Trust Funds, paras. 26-27.
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CREATING CONDITIONS FOR SUCCESS
25. Funding mechanisms do not operate in a vacuum. Their ability to promote post-conflict recovery
depends in large part on their suitability to the conditions in which they are developed and
implemented. While many of the conditions in post-conflict countries are not amenable to external
influence, some are.
In particular, bilateral donors such as the Netherlands have the ability to
influence the environment in the following ways:
•
Donors should base their decisions on which mechanisms to use to finance recovery on
what they want to achieve. This requires a clear strategy that has the flexibility to evolve
over time.
To increase the effectiveness and impact of donor funding, this strategy
should support a nationally owned and led process that would begin as soon as possible
aimed at developing a national recovery plan;
•
Donors should align resource allocation to the national plan and seek implementation
modalities that allow funds to flow through government budgets to the extent feasible.
To achieve this objective, donors should channel as much money as possible through
multilateral mechanisms, such as MDTFs, and avoid earmarking/preferencing that money.
Donors should match fund administrator with what they want to achieve;
•
Donors should be realistic about what any actor, national or international, can achieve in
the prevailing environment. They should strike a balance between a) meeting immediate
needs in order to deliver a peace dividend and b) developing the capacity of actors,
official and non-governmental, at all levels to identify their own needs and decide how
resources should be allocated among competing priorities;
•
Donors should not expect that financing can be left on autopilot if desired outcomes are
to be achieved;
•
Donors should continue to press the UN and the World Bank to implement the reforms
necessary to improve their ability to deliver effectively in post-conflict environments,
including agreeing on ways to improve their partnership.
26. Donors should base their decisions on which mechanisms to use to finance recovery
on what they want to achieve. This requires a clear strategy that has the flexibility to
evolve over time. To increase the effectiveness and impact of donor funding, this strategy
should support a nationally owned and led process that would begin as soon as possible
aimed at developing a national recovery plan. Because different financing mechanisms are best
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suited to deliver certain objectives in particular environments and timeframes, the choice of which
mechanism to use will be greatly facilitated by clarity on donor objectives. A focus on immediate
recovery would argue in favour of a Common Humanitarian Fund, a UN administered MDTF, use of
the World Bank’s Post-Conflict Fund or its LICUS Trust Fund, UNDP’s Thematic Trust Fund for Crisis
Prevention and Recovery, or direct execution through INGOs, UN agencies (via the CAP) or possibly
local NGOs/civil society groups. A focus on medium term recovery and capacity building would argue
in favour of a World Bank administered MDTF (especially for development of national recovery
strategy, strengthening state but also community-driven development initiatives), co-financing
through IDA, or a UN administered MDTF (especially for projects). Ideally, the World Bank and/or UN
administered MDTFs would allocate resources to executing bodies, including UN agencies and
international and local NGOs, based on nationally approved and/or developed recovery plans.
27. Since most donors will want to support both immediate and medium-term activities, they should
begin by addressing the highest priority needs identified in early needs assessments, such as the PostConflict Needs Assessments (PCNAs), which is increasingly the international community’s tool of
choice in the immediate aftermath of conflict. They should simultaneously help empower national
actors to take responsibility for both determining national needs and how to meet them. This means
that financing should be directed both at mechanisms capable of providing immediate recovery
assistance and at those capable of meeting medium-term needs. Because World Bank MDTFs come
on stream more slowly than UN administered MDTFs, the Bank should be asked to begin the process
of setting up an MDTF as early in the recovery phase as possible.
28. Donor-supported joint assessments such as PCNAs can be a useful means of starting a process of
identifying national priorities, particularly if they are broadly participatory, but they are only the start
of such a process. Donors should make it clear to national authorities, MDTFs and external executing
agencies that “national ownership” and “government ownership” are not synonymous, and that every
effort should be made to include non-governmental actors in the process of identifying and meeting
needs along with governmental actors. Funding should be directed preferentially to those executing
agencies that align their activities with high priority objectives identified by national actors and have
proven ability to support capacity building for national actors (central and local levels, governmental
and non-governmental).
29. Donors should align resource allocation to national recovery plans and promote
implementation modalities that allow funds to flow through government budgets to the
extent feasible.
possible
To achieve this objective, donors should channel as much money as
through
multilateral
mechanisms,
earmarking/preferencing that money.
what they want to achieve.
such
as
MDTFs,
and
avoid
Donors should match fund administrator with
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30. There is growing evidence from studies of general budget support that providing resources onbudget can produce a range of benefits, including strengthening financial management capacity,
improving allocative and operational efficiency of public expenditures, and increasing harmonization,
alignment and coherence of external support. 13 While post-conflict states generally do not have the
financial management capacity necessary to manage large amounts of general budget support, some
of the same benefits appear to accrue from providing post-conflict recovery resources on-budget. 14
31. Donors should therefore provide as much of their post-conflict financing on-budget as possible.
They should ensure that a properly tasked and capable monitoring agent is in place and that the
government receives adequate support from the monitoring agent or other donors such as the World
Bank to promote good practice.
The most effective vehicle for this is a World Bank administered
MDTF with minimal preferencing and maximum alignment with a national recovery plan, existing or
emerging.
32. At the same time, as the experience with the MDTFs for Southern Sudan and Aceh and Nias
demonstrate, it is also important that there is adequate flexibility to finance off-budget if the need
arises, for example if the government proves not to have the capacity to disburse resources in a
timely manner. While this could be provided through most of the financing mechanisms in Table 1,
the transaction costs for both donors and recipients will be minimized if such financing is also
channelled through an MDTF. At present UN MDTFs are best suited to providing support off-budget,
especially when channelled through UN agencies, although the Bank is improving its capacity in the
regard.15
The Bank is gaining considerable experience with Community Driven Development and
approval of a framework agreement between World Bank and the UN that will enable UN agencies to
gain Partner Agency status with Bank administered MDTFs quickly will also significantly enhance Bank
capacity to channel resources flexibly. 16
33. If donors are unable to channel resources through multilateral mechanisms, they should try to
align their programming with a) the national recovery plan or b) in the absence of a national recovery
plan, the programme of work of a costed, well-prioritized PCNA or of the MDTF.
13
Joint Evaluation of General Budget Support, What Are the Effects of General Budget Support?, March 2007.
14
A World Bank public finance management review of Afghanistan found that only one quarter of public finances were
channelled through the government budget in 2005. The remainder were executed by implementing agencies contracted
directly by the donors. The Bank concluded: “This constitutes a major challenge – for both Government and donors – in budget
management.” World Bank, Afghanistan: Managing Public Finances for Development, p. 7, para. 1.25, 2006.
15
For information on UN administered MDTFs see the UN Development Group website on pooled funding mechanisms under
“Post-Crisis Transitions”. The UN is also improving its capacity to channel resources to NGOs and other actors such as the
International Organization for Migration.
16
For example, see World Bank, Social Development Department, Community-Driven Development in the Context of ConflictAffected Countries: Challenges and Opportunities, Report No. 36425 – GLB, June 20, 2006 and the World Bank CommunityDriven Development website.
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34. Donors should be realistic about what any actor, national or international, can
achieve in the prevailing environment. They should strike a balance between a) meeting
immediate needs in order to deliver a peace dividend and b) developing the capacity of
actors, official and non-governmental, at all levels to identify their own needs and decide
how resources should be allocated among competing priorities.
Post-conflict recovery
requires constant trade-offs. Achieving “quick wins” – generally decided on and delivered by external
actors – to demonstrate the value of peace is important but it should not detract from the importance
of local actors making their own decisions. This takes longer to achieve but in the end, the outcomes
will be more sustainable.
35. Donors consistently underestimate the amount of time required to develop capacity in postconflict situations and they are often unwilling to engage fully with key stakeholders, such as former
members of the armed opposition or transitional governments. For example, the Results Focussed
Transitional Framework for Liberia, published in February 2004, listed as priority outcomes by
December 2005:
‘Revenue collection, budgeting, and financial management practices brought into line with
current
best
practice;
strengthened
accounting
systems
and
practices
following
establishment of a computerized financial management system. Internal financial control
mechanisms established and implemented, and independent audit agency (General Auditing
Office) made more effective.
De-concentration of financial management to different
spending centres within the NTGL [National Transitional Government of Liberia]’. 17
In reality, financial management practices of the NTGL were so far from “current best practice” by mid
2005 that the donors decided to impose a Governance and Economic Management Assistance
Programme (GEMAP) on the NTGL in an effort to stem the flow of state resources into private
pockets. Prior to this, the donors had not given economic reforms a high priority, preferring to wait
until elections were held and a new government was in place. This strategy proved to be highly
counterproductive.
36. Donors also frequently underestimate the degree to which the politics of post-conflict
environments affects the ability of national authorities and other key stakeholders to reach agreement
on critical issues and thus the speed with which activities can be implemented. In some cases, as in
Liberia with DDR and SSR, they simply do not want to be delayed while waiting for national
stakeholders to reach agreement.
17
This leads to a preference for financing mechanisms that can
National Transitional Government of Liberia, United Nations and World Bank, Joint Needs A ssessment, February 2004, pp. 2932.
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implement rapidly and intolerance for “slow” disbursement. This does not, however, lead to the most
sustainable outcomes.
37. Donors should not expect that financing can be left on autopilot if desired outcomes
are to be achieved. One of the attractions of pooled funding and channel funding is that they shift
part of the responsibility for managing programmes to other actors. It enables donors to support
more activities in countries than they would if they had to manage these activities themselves. At the
same time, donors frequently express dissatisfaction with the way in which their financing is used in
post-conflict environments, particularly with the speed of disbursement through MDTFs or CHFs.
38. Fund administrators have clearly over-promised and under-performed in some instances (as with
UNDP disbursement to NGOs through the Sudan CHF in 2005/06 and with World Bank
underestimation of the problems associated with disbursing through government in Southern Sudan).
At the same time, evaluations have found that in these cases donors have not played as active and
constructive a role as they could have on fund oversight bodies. In the case of the IRFFI in Iraq, for
example,
‘…informants expressed concern that the Donor Committee has not realized its potential as a
strategic body. The Committee has not met on a six month basis as originally anticipated.
Indeed, the committee has not formally met since 2005, although there the two ITF’s
provided a briefing in May 2006. It means that the Committee has not focused on guidance
to IRFFI operations at a time when there has been a serious deterioration in the program
environment, which has particular [sic] affected WB ITF disbursement. Donors have not
conducted their own joint assessment of the situation.
The burden of strategy and risk
mitigating has been placed largely on the two Administrators’. 18
39. Donors have also been reluctant to run political interference for MDTFs, apparently expecting the
World Bank and UNDP to be able to play a diplomatic, as well as a fund management, role. Problems
encountered by the World Bank administered Multi-Country Demobilization and Reintegration
Programme (MDRP) in DRC highlight the inadequacy of this approach.
Faced with government
intransigence in implementing the DDR programme, MDRP and World Bank officials appear to have
failed to alert donors in a timely manner to the blockages, but donors were also not monitoring the
situation adequately and were slow to respond once alerted. Donors were extremely displeased with
the slow rate of disbursement from the MDRP through the national DDR committee, and complained
vociferously that the lack of progress in the DDR programme lay with the inability of the MDRP to
ensure that all necessary facilities and programmes were in place.
18
In reality, facilities and
Scanteam/Norway, Review of Post-Crisis Multi-Donor Trust Funds, Volume II: Country Annexes, February 2007, Annex D:
The Iraq Trust Funds, para. 103.
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programmes were not in place in large part because it was in the interest of the government to
prevent the MDRP from functioning effectively. 19
It is essential that donors provide the political
support necessary for the effective functioning of financing mechanisms.
40. In order for donors to provide the appropriate oversight and support to those bodies managing
the resources donors provide in post-conflict environments, it is essential to have a) a coherent donor
government strategy defining donor government priorities in a given country that is agreed among all
major donor ministries, b) adequate personnel on the ground, and c) support from staff in capitals as
required.
41. Donors should continue to press the UN and the World Bank to implement the
reforms necessary to improve their ability to deliver effectively in post-conflict
environments, including agreeing on ways to improve their partnership.
It is clear that
pressure from major Bank shareholders has led the Bank to work very seriously with the UN to align
standards and practices in crises and emergency situations. In addition to working out a framework
agreement and a partnership agreement (Box 1), the Bank and the United Nations Development
Group (UNDG) have been working to improve the quality of the PCNAs and the related Transitional
Results Frameworks (TRFs). 20 The Bank should also be encouraged to establish a central office for
MDTF management, similar to that established by UNDP to manage UNDG MDTFs and other joint UN
funds.
42. Donors should also encourage the UN family to deepen its work on the One UN approach, which
would bring greater coherence to UN efforts at country level.
Thus far, One UN pilots have not
included any post-conflict countries, and it is not clear how the One UN approach would apply to postconflict countries in the first few years following the end of conflict since its “One Programme” is
focussed on the UN Development Assistance Framework, which is a longer term development
strategy, not a transition or recovery strategy.
19
See for example Ball and Hendrickson, Review of International Financing Arrangements for Disarmament, Demobilization and
Reintegration, Phase 2 Report.
20
A 2006 review of experience with PCNAs indicated that while they had been effective in mobilizing external resources and
developing a shared analysis of needs, they lacked a number of key elements: a) strategic focus on peacebuilding, b)
prioritization, c) focus on national institutional capacity building, and d) appropriate level of attention to reform and resource
needs in political governance, rule of law and security institutions. International Development Association, Operational
Approaches and Financing in Fragile States, p 14.
For progress to date on revising the PCNA and TRF, see United Nations Development Group and World Bank, Joint Guidance
Note on Integrated Recovery Planning using Post-Conflict Needs Assessments and Transitional Results Frameworks, Working
Draft for Circulation, September 2007.
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ANNEX 1. PRINCIPLES FOR GOOD INTERNATIONAL
ENGAGEMENT IN FRAGILE STATES AND SITUATIONS
Preamble
A durable exit from poverty and insecurity for the world’s most fragile states will need to be driven by
their own leadership and people. International actors can affect outcomes in fragile states in both
positive and negative ways. International engagement will not by itself put an end to state fragility,
but the adoption of the following shared Principles can help maximise the positive impact of
engagement and minimise unintentional harm. The Principles are intended to help international
actors foster constructive engagement between national and international stakeholders in countries
with problems of weak governance and conflict, and during episodes of temporary fragility in the
stronger performing countries. They are designed to support existing dialogue and coordination
processes, not to generate new ones. In particular, they aim to complement the partnership
commitments set out in the Paris Declaration on Aid Effectiveness. As experience deepens, the
Principles will be reviewed periodically and adjusted as necessary.
The long-term vision for international engagement in fragile states is to help national reformers to
build effective, legitimate, and resilient state institutions, capable of engaging productively with their
people to promote sustained development. Realisation of this objective requires taking account of,
and acting according to, the following Principles:
The Basics
1. Take context as the starting point.
2.
Do no harm.
The Role of the State & Peacebuilding
3. Focus on state-building as the central objective.
4. Prioritise prevention
5. Recognise the links between political, security and development objectives.
6. Promote non-discrimination as a basis for inclusive and stable societies.
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The Practicalities
7. Align with local priorities in different ways in different contexts.
8. Agree on practical coordination mechanisms between international actors.
9. Act fast … but stay engaged long enough to give success a chance.
10. Avoid pockets of exclusion.
Source: Organisation for Economic Co-operation and Development, Development Assistance Committee,
Principles for Good International Engagement in Fragile States & Situations, April 2007.
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ANNEX 2. MDF’S HOUSING PROGRAMME
In February 2006, Eye on Aceh and Aid Watch published an assessment of international tsunami
assistance in Aceh, A People’s Agenda? Post-Tsunami Aid in Aceh. While painting an overall picture
of unnecessary duplication of effort, inadequate consultation with local beneficiaries, and potential
negative effects on Aceh’s social and physical environment, the report identified a number of activities
that ran counter to the general trend. One was the housing programme financed by the Multi-Donor
Fund for Aceh and Nias.
‘The MDTF's two-phase Settlement Rehabilitation and Reconstruction project is working
together with the KDP and UPP [Urban Poverty Programme] to build and repair housing for
hundreds of villages in Aceh and Nias…’
‘Implementation of the Fund's housing programme is grounded in the same philosophy as
the UPP and KDP mechanisms: the belief that community empowerment and education
should be an integral part of a community infrastructure programme. The programme has
recruited UPP facilitators, and expanded on the existing network of KDP staff, as well as
recruiting and training new staff whose focus is solely on housing. Local housing
committees of 10-15 people are being established in the target villages, as well as a local
oversight Board of Trustees, all of whom are notarised. Via the local housing committees,
the scheme gives cash grants of Rp 42 million (the BRR approved rate for a standard Type
36 house) to each beneficiary, whose responsibility it is to plan, design and implement the
building of their own homes. The houses must meet earthquake proof, environmental, and
other standards, including the possibility for future extension. Grants of Rp 15 million
($1,615) are also available to those in the area who need money to repair their houses. The
money is disbursed via a special account established by the housing committees. The Fund
has also placed consultants in the field to assist with design and other technical matters, and
to help ensure that pre-requisites of transparency, accountability, environmental standards
and others are met. This is, according to the MDTF, ‘the ultimate in community driven
development.’
‘In Gampong Baru, Banda Aceh, the community is very happy with their new situation, one
resident explains: ‘We've been promised houses by several NGOs. UPLINK came to do land
mapping in April and promised 250 houses-no implementation. World Vision arrived here in
September to build barracks, and they said they would follow that with 213 houses-no
implementation. Perhaps that's lucky for us in some way. The UPP came last week and told
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us we could have this new housing scheme. We can already see the results in that we have
already set up housing committees and have begun to discuss budgets and building
strategies; it's great.’ For communities frustrated by empty promises, the MDTF housing
scheme is the opportunity to take control of at least some part of their lives.’
‘No scheme, however, is without potential problems. A number of interlocutors voiced
concerns about the potential for corruption, in the form of giving 'coffee money,' to those
whose task it is to approve each phase. As in all Trust Fund projects, strict anti-corruption
mechanisms have been put in place in principle: the money for a new house is given in three
tranches and for repairs in two tranches, and any non-fulfilment of requirements or hint of
malpractice will result in the next tranche being withheld. The assessment of progress is
conducted through a community adjudication committee that gives technical assistance to
people to help design their own homes. Nevertheless, a local community group based in the
same sub-district as the pilot project voiced concerns: ‘The opportunity for some corruption
in this MDTF mechanism is very high. For example, it would be easy to over-price materials,
or over-charge for building contractors etc. That's the Acehnese way, but we don't call it
corruption’ (p. 33).’
© Clingendael Institute
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ANNEX 3. DOCUMENTATION CONSULTED
Ball, Nicole and Dylan Hendrickson, Review of International Financing Arrangements for Disarmament,
Demobilization and Reintegration, Phase 2 Report to Working Group 2 of the Stockholm Initiative on
Disarmament, Demobilization and Reintegration, September 26, 2005.
Center on International Cooperation/New York University, “Evaluation of the Common Funds in the Sudan,” 7
November 2006.
Center on International Cooperation/New York University, “Evaluation of the Pooled Fund in the Democratic
Republic of the Congo,” 7 November 2006.
Development Initiatives, Review of Trust Fund Mechanisms for Transition Financing, Phase 2 Report , 29 May
2006.
International Development Association, Operational Approaches and Financing in Fragile States, Washington, DC:
Operational Policy and Country Services and Resource Mobilization Department, June 2007.
International Development Association, Progress on Strengthening Collaboration with United Nations Partners in
Post-Conflict Countries, Washington, DC: Operational Policy and Country Services and Resource Mobilization
Department, October 2006.
Joint Evaluation of General Budget Support, What Are the Effects of General Budget Support?, March 2007.
Mick Foster Economics Ltd., “Aid Instruments in Fragile and Post Conflict States: A Desk Review for DFID Nepal,”
Draft, March 2007.
National Transitional Government of Liberia, United Nations and World Bank, Joint Needs Assessment, February
2004, pp. 29-32.
Organisation for Economic Co-operation and Development, Development Assistance Committee, Principles for
Good International Engagement in Fragile States & Situations, April 2007.
Ponzio, Richard, “The United Nations Peacebuilding Commission: origins and initial practice,” Disarmament
Forum, Issue 2, 2007, pp. 5-15.
“Principles and Good Practice of Humanitarian Donorship,” 17 June 2003.
Scanteam/Norway, Review of Post -Crisis Multi-Donor Trust Funds, Final Report, February 2007.
ScanTeam/Norway, Review of Post -Crisis Multi-Donor Trust Funds, Volume II: Country Annexes, February 2007.
Stoddard, Abby, Dirk Solomons, Katherine Haver and Adele Harmer, Common Funds for Humanitarian Action in
Sudan and the Democratic Republic of Congo, Monitoring and Evaluation Study, New York: Center on
International Cooperation/New York University in collaboration with The Humanitarian Policy Group/Overseas
Development Institute, December 2006, http://www.cic.nyu.edu/.
United Nations, “Peacebuilding Fund Terms of Reference,” 22 August 2006.
26
© Clingendael Institute
United Nations, Peacebuilding Fund website.
United Nations, Inter-Agency Standing Committee, “Guidance Note on Using the Cluster Approach to Strengthen
Humanitarian Response,” 24 November 2006.
United Nations, Multi-Donor Trust Fund Office website.
United Nations Development Group, Mult i-Donor Trust Funds Guidance Note to UN Country Teams, March 2007.
UN Development Group website on pooled funding mechanisms.
United Nations Development Group/UNDP, “Multi-Donor Trust Fund Office, Partnership Bureau, UNDP, An
Overview,” nd.
United Nations/World Bank, In Support of Peacebuilding: Strengthening the Post Conflict Needs Assessment ,
January 2007, http://www.undg.org/archive_docs/9023PCNA_Review_Report__In_Support_of_Peacebuilding__Strengthening_the_PCNA.pdf..
World Bank Community-Driven Development website.
World Bank Fragile States Group website.
World Bank Operational Manual, Operational Polices, OP 8.00, “Rapid Response to Crises and Emergencies,”
March 2007.
World Bank Operational Manual, Bank Procedures, BP 8.00, “Rapid Responses to Crises and Emergencies,” March
2007.
World Bank Operational Manual, Bank Procedures, OP.14.40, “Trust Funds,”
http://wbln0018.worldbank.org/Institutional/Manuals/OpManual.nsf/0/214475b6b9924bce8525672c007d081e?Op
enDocument .
World Bank Operational Manual, Bank Procedures, OP.2.30, “Development Cooperation and Conflict,”
http://wbln0018.worldbank.org/institutional/manuals/opmanual.nsf/8d1a4edd930ec366852567fa00106d34/58706
98de018c520852569e5004ec9ad?OpenDocument .
World Bank, Operations Policy and Country Services, “Toward a New Framework for Rapid Bank Response to
Crises and Emergencies,” January 12, 2007 (revised March 2007).
World Bank, Social Development Department, Community-Driven Development in the Context of Conflict-Affected
Countries: Challenges and Opportunities, Report No. 36425 – GLB, June 20, 2006.